Austria RR2 03

MONTERO // 3A TAX DIGESTS
AGATEP ARCAINA AUSTRIA BAADERA BANTA BELLO BUGAY CARAAN COLOQUIO CUALOPING DE LUIS DIPLOMA FAJARDO GO
LIM, J. LIM, Q. LUNA OCAMPO ONG PASCUAL REYES TRIAS TUAZON VANSLEMBROUCK VILLARIN, L. VILLARIN, P. VILLARIVERA
each bracket and the cumulative total tax for the entire net estate, pursuant
Revenue Regulations 02-03 (December 16, 2002), Sections 1-9 only
to the rates provided in the Code.
Subject: Consolidated Revenue Regulations on Estate Tax and Donor's
"If the Net Estate is:
Tax Incorporating the Amendments Introduced by Republic Act No. 8424,

the Tax Reform Act of 1997
SECTION 1. Scope. Pursuant to Section 244, in relation to Sections 84
to 104 of the Tax Code of 1997 (Code), these Regulations are hereby
promulgated for the purpose of
consolidating all the regulations on estate tax and donor's tax, thereby
amending Revenue Regulations No. 17-93 relative to the change in the tax
rates of estate tax and donor's tax pursuant to Republic Act No. 8424, the
manner of claiming the deductions from the gross estate of the decedent,
and for other purposes. These regulations shall govern the taxation of the
transmission of the decedent's estate and donations made by persons,
natural or juridical, whether citizens or aliens, residents or non-residents.
For purposes of these regulations, the provisions of the Family Code of the
Philippines (E.O. No. 209) which took effect on August 3, 1988 shall
govern the property relations between husband and wife whose marriage
was celebrated on or after such date. For marriages celebrated prior to the
effectivity of the Family Code of the Philippines, the Civil Code of the
Philippines shall govern the property relations between husband and wife
in relation to the pertinent provisions of the Family Code.
SECTION 2. Rates Of Estate Tax . The transfer of the net estate of
every decedent, whether resident or non-resident of the Philippines, as
determined in accordance with the Code, shall be subject to the estate tax.
The entire value of the net estate is divided into brackets and each rate is
imposed on the corresponding bracket. Below is a table showing the tax on
Over
But not over
P200,000
500,000
2,000,000
5,000,000
10,000,000
P200,000
500,000
2,000,000
5,000,000
10,000,000
And over
The
tax
shall be
Exempt
0
P15,000
135,000
465,000
1,215,000
Plus
5%
8%
11%
15%
20%
Of
the
excess over
P200,000
500,000
2,000,000
5,000,000
10,000,000
SECTION 3. The Law That Governs The Imposition Of Estate Tax . It is

a well-settled rule that estate taxation is governed by the statute in force at
the time of death of the decedent. The estate tax accrues as of the death
of the decedent and the accrual of the tax is distinct from the obligation to
pay the same. Upon the death of the decedent, succession takes place
and the right of the State to tax the privilege to transmit the estate vests
instantly upon death.
The application of the rates herein prescribed and the procedures in
determining the estate tax due shall apply to estate taxes falling due or
have accrued beginning January 1, 1998, the effectivity date of Republic
Act No. 8424, otherwise known as "The Tax Reform Act of 1997".
SECTION 4. Composition Of The Gross Estate. The gross estate of a
decedent shall be comprised of the following properties and interest
therein at the time of his death, including revocable transfers and transfers
for insufficient consideration, etc.:
A) Residents and citizens all properties, real or personal, tangible

or intangible, wherever situated.

B) Non-resident aliens only properties situated in the Philippines
To determine the value of the right to usufruct, use or habitation, as well as
provided, that, with respect to intangible personal property, its
that of annuity, there shall be taken into account the probable life of the
inclusion in the gross estate is subject to the rule of reciprocity
beneficiary in accordance with the latest basic standard mortality table, to
provided for under Section 104 of the Code.
be approved by the Secretary of Finance, upon recommendation of the

Insurance Commissioner.
SECTION 5. Valuation Of The Gross Estate. The properties comprising

the gross estate shall be valued based on their fair market value as of the
SECTION 6. Computation Of The Net Estate Of A Decedent Who Is Either
time of death.
A Citizen Or Resident Of The Philippines. The value of the net estate of

a citizen or resident alien of the Philippines shall be determined by
If the property is a real property, the fair market value shall be the fair
deducting from the value of the gross estate the following items of
market value as determined by the Commissioner or the fair market value
deduction:
as shown in the schedule of values fixed by the provincial and city

assessors, whichever is higher. For purposes of prescribing real property
(A) Expenses, losses, indebtedness, and taxes Such amounts for:
values, the Commissioner is authorized to divide the Philippines into
(1) Actual funeral expenses (whether paid or unpaid) up to the time of
different zones or areas and shall, upon consultation with competent
interment, or an amount equal to five percent (5%) of the gross estate,
appraisers, both from the private and public sectors, determine the fair
whichever is lower, but in no case to exceed P200,000.
market value of real properties located in each zone or area.

Any amount of funeral expenses in excess of the P200,000 threshold,
In the case of shares of stocks, the fair market value shall depend on
whether the same had actually been paid or still payable, shall not be
whether the shares are listed or unlisted in the stock exchanges. Unlisted
allowed as a deduction under this Subsection. Neither shall the unpaid
common shares are valued based on their book value while unlisted
portion of the funeral expenses incurred which is in excess of the
preferred shares are valued at par value. In determining the book value of
P200,000 threshold be allowed to be claimed as a deduction under "claims
common shares, appraisal surplus shall not be considered as well as the
against the estate" provided under Subsection (C) hereof.
value assigned to preferred shares, if there are any.

The term "FUNERAL EXPENSES" is not confined to its ordinary or usual
For shares which are listed in the stock exchanges, the fair market value
meaning. They include:
shall be the arithmetic mean between the highest and lowest quotation at a
(a) The mourning apparel of the surviving spouse and unmarried
date nearest the date of death, if none is available on the date of death
minor children of the deceased bought and used on the occasion
itself.
of the burial;

(b) Expenses for the deceased's wake, including food and drinks;
percent (5%) of the gross estate is P70,000, only P70,000 will be
(c) Publication charges for death notices;
allowed as deduction;
(d) Telecommunication expenses incurred in informing relatives of the

deceased;
(e) Cost of burial plot, tombstones, monument or mausoleum but not
(c) If five percent (5%) of the gross estate is P220,000 and the
amount actually incurred is P215,000, the maximum amount that
may be deducted is only P200,000;
their upkeep. In case the deceased owns a family estate or
(d) If five percent (5%) of the gross estate is P100,000 and the total
several burial lots, only the value corresponding to the plot where
amount incurred is P150,000 where P20,000 thereof is still
he is buried is deductible;
unpaid, the only amount that can be claimed as deduction for
(f) Interment and/or cremation fees and charges; and
funeral expenses is P100,000. The entire P50,000 excess amount
(g) All other expenses incurred for the performance of the rites and
consisting of P30,000 paid amount and P20,000 unpaid amount
ceremonies incident to interment.
can no longer be claimed as FUNERAL EXPENSES. Neither can
Expenses incurred after the interment, such as for prayers, masses,
the P20,000 unpaid portion be deducted from the gross estate as
entertainment, or the like are not. deductible. Any portion of the funeral and
CLAIMS AGAINST THE ESTATE under Subsection (C) hereof
burial expenses borne or defrayed by relatives and friends of the deceased

are not deductible.
(2) Judicial expenses of the testamentary or intestate proceedings.

Expenses allowed as deduction under this category are those incurred in
Medical expenses as of the last illness will not form part of funeral
the inventory-taking of assets comprising the gross estate, their
expenses but should be claimed under subsection (F) of this section.
administration, the payment of debts of the estate, as well as the

distribution of the estate among the heirs. In short, these deductible items
Actual funeral expenses shall mean those which are actually incurred in
are expenses incurred during the settlement of the estate but not beyond
connection with the interment or burial of the deceased. The expenses
the last day prescribed by law, or the extension thereof, for the ling of the
must be duly supported by receipts or invoices or other evidence to show
estate tax return. Judicial expenses may include:
that they were actually incurred.

(a) Fees of executor or administrator;
Illustrations on how to determine the amount of allowable funeral expenses
(b) Attorney's fees;
(c) Court fees;

(a) If five percent (5%) of the gross estate is P70,000 and the amount
(d) Accountant's fees;
actually incurred is P50,000, only P50,000 will be allowed as
(e) Appraiser's fees;
deduction;
(f) Clerk hire;
(b) If the expenses actually incurred amount to P90,000 and ve
(g) Costs of preserving and distributing the estate;

(h) Costs of storing or maintaining property of the estate; and
deductions from gross estate. Provided, however, that the following
(i)
requirements/documents are complied with/submitted
Brokerage fees for selling property of the estate.
(a) In case of simple loan (including advances):

Any unpaid amount for the aforementioned cost and expenses claimed
(1) The debt instrument must be duly notarized at the time the
under "Judicial Expenses" should be supported by a sworn statement of
indebtedness was incurred, such as promissory note or
account issued and signed by the creditor.
contract of loan, except for loans granted by fnancial

institutions where notarization is not part of the business
(3) Claims against the estate. The word "claims" is generally construed
practice/policy of the fnancial institution-lender;
to mean debts or demands of a pecuniary nature which could have been
(2) Duly notarized Certifcation from the creditor as to the unpaid
enforced against the deceased in his lifetime and could have been reduced
balance of the debt, including interest as of the time of death.
to simple money judgements. Claims against the estate or indebtedness in
If the creditor is a corporation, the sworn certifcation should
respect of property may arise out of: (1) Contract; (2) Tort; or (3) Operation
be signed by the President, or Vice-President, or other
of Law.
principal offcer of tie corporation. If the creditor is a
(i) Requisites for Deductibility of Claims Against the Estate
partnership, the sworn certifcation should be signed by any of
(a) The liability represents a personal obligation of the deceased

existing at the time of his death except unpaid obligations incurred
incident to his death such as unpaid funeral expenses (i.e.,
expenses incurred up to the time of interment) and unpaid medical
expenses which are classified under a different category of
deductions pursuant to these Regulations;
(b) The liability was contracted in good faith and for adequate and full
consideration in money or money's worth;
(c) The claim must be a debt or claim which is valid in law and
enforceable in court;
(d) The indebtedness must not have been condoned by the creditor or
the action to collect from the decedent must not have prescribed.
(ii) Substantiation Requirements. All unpaid obligations and liabilities of
the decedent at the time of his death (except unpaid funeral or medical
expenses which are deductible under a different category) are allowed as
the general partners. In case the creditor is a bank or other

fnancial institutions, the Certifcation shall be executed by the
branch manager of the bank fnancial institution which
monitors and manages the loan of the decedent debtor. If the
creditor is an individual, the sworn certifcation should be
signed by him. In any of these cases, the one who should
certify must not be a relative of the borrower within the fourth
civil degree, either by consanguinity or affinity, except when
the requirement below is complied with.
When the lender, or the President/Vice-president/principal offcer
of the creditor-corporation, or the general partner of the creditorpartnership is a relative of the debtor in the degree mentioned
above, a copy of the promissory note or other evidence of the
indebtedness must be fled with the RDO having jurisdiction over
the borrower within ffteen days from the execution thereof.

If the creditor is a corporation, the sworn Certifcation should

(3) In accordance with the requirements as prescribed in existing
be signed by the President, or Vice-President, or other
or prevailing internal revenue issuances, proof of fnancial
principal offcer of the corporation. If the creditor is a
capacity of the creditor to lend the amount at the time the loan
partnership, the sworn certifcation should be signed by any of
was granted, as well as its latest audited balance sheet with a
the general partners. If the creditor is a sole proprietorship,
detailed schedule of its receivable showing the unpaid
the sworn certifcation should be signed by the owner of the
balance of the decedent-debtor. In case the creditor is an
business. In any of these cases, the one who issues the
individual who is no longer required to fle income tax returns
certifcation must not be a relative of the decedent-debtor
with the Bureau, a duly notarized Declaration by the creditor
within the fourth civil degree, either by consanguinity or
of his capacity to lend at the time when the loan was granted
affnity, except when the requirement below is complied with.
without prejudice to verifcation that may be made by the BIR

to substantiate such declaration of the creditor. If the creditor
When the lender, or the President/Vice-President/principal
is a nonresident, the executor/administrator or any of the legal
offcer of the creditor-corporation, or the general
heirs must submit a duly notarized declaration by the creditor
partner of the creditor-partnership is a relative of the
of his capacity to lend at the time when the loan was granted,
debtor in the degree mentioned above, a copy of the
authenticated or certifed to as such by the tax authority of the
promissory
country where the non-resident creditor is a resident
indebtedness must be fled with the RDO having
(4) A statement under oath executed by the administrator or
note
or
other
evidence
of
the
jurisdiction over the borrower within ffteen days from
executor of the estate refecting the disposition of the
the execution thereof.
proceeds of the loan if said loan was contracted within three

(3) years prior to the death of the decedent;
(3) Certifed true copy of the latest audited balance sheet of the
(b) If the unpaid obligation arose from purchase of goods or services:
creditor with a detailed schedule of its receivable showing the
(1) Pertinent documents evidencing the purchase of goods or
unpaid balance of the decedent-debtor. Moreover, a certifed
service, such as sales invoice/delivery receipt (for sale of
true copy of the updated latest subsidiary ledger/records of
goods), or contract for the services agreed to be rendered (for
the debt of the debtor-decedent, (certifed by the creditor, i.e.,
sale of service), as duly acknowledged, executed and signed
the officers mentioned in the preceding paragraphs) should
by decedent-debtor, and creditor, and statement of account
likewise be submitted.
given by the creditor as duly received by the decedent-debtor;
(c)
Where the settlement is made through the Court in a testate or
(2) Duly notarized Certifcation from the creditor as to the unpaid
intestate proceeding, pertinent documents filed with the Court
balance of the debt, including interest as of the time of death.
evidencing the claims against the estate, and the Court Order

approving the said claims, if already issued, in addition to the

documents mentioned in the preceding paragraphs.
In case unpaid mortgage payable is being claimed by the estate,

verification must be made as to who was the beneficiary of the
loan
proceeds. If
the loan is
found to be merely
an
(4) Claims of the deceased against insolvent persons where the value of
accommodation loan where the loan proceeds went to another
the decedent's interest therein is included in the value of the gross
person, the value of the unpaid loan must be included as a
estate; and,
receivable of the estate. If there is a legal impediment to recognize
(5) Unpaid mortgages, taxes and casualty losses
the
same
as
receivable
of
the
estate,
said
unpaid
(a) Unpaid mortgages upon, or any indebtedness in respect to,
obligation/mortgage payable shall not be allowed as a deduction
property where the value of the decedent's interest therein,
from the gross estate. In all instances, the mortgaged property, TO
undiminished by such mortgage or indebtedness, is included in
THE EXTENT OF THE DECEDENT'S INTEREST THEREIN,
the value of the gross estate. The deduction herein allowed in the
should always form part of the gross taxable estate.
case of claims against the estate, unpaid mortgages or any

indebtedness shall, when founded upon a promise or agreement,
"(B) Property previously taxed . . .
be limited to the extent that they were contracted bona fide and for
"(C) Transfers for public use . . .
an adequate and full consideration in money or money's worth.
"(D) The family home An amount equivalent to the current fair market
(b) Taxes which have accrued as of the death of the decedent which
value of the decedent's family home: Provided, however, That if the said
were unpaid as of the time of death. This deduction will not include
current fair market value exceeds One million pesos (P1,000,000), the
income tax upon income received after death, or property taxes
excess shall be subject to estate tax. As a sine qua non condition for the
not accrued before his death, or the estate tax due from the
exemption or deduction, said family home must have been the decedent's
transmission of his estate.
family home as certified by the barangay captain of the locality.
(c) There shall also be deducted losses incurred during the settlement
of the estate arising from fires, storms, shipwreck, or other
a)
Definition of terms
casualties, or from robbery, theft or embezzlement, when such
Family home The dwelling house, including the land on which it
losses are not compensated for by insurance or otherwise, and if
is situated, where the husband and wife, or a head of the
at the time of the filing of the return such losses have not been
family, and members of their family reside, as certified to
claimed as a deduction for income tax purposes in an income tax
by the Barangay Captain of the locality. The family home
return, and provided that such losses were incurred not later than
is deemed constituted on the house and lot from the time
the last day for the payment of the estate tax as prescribed in
it is actually occupied as a family residence and is
Subsections (A) and (B) of Section 91.
considered as such for as long as any of its beneficiaries

actually resides therein. (Arts. 152 and 153, Family Code)

and dependent upon him or her for their chief support,

For purposes of these regulations, however, actual occupancy of
where such brothers or sisters or children are not more
the house or house and lot as the family residence shall
than twenty one (21) years of age, unmarried and not
not be considered interrupted or abandoned in such
gainfully employed or where such children, brothers or
cases as the temporary absence from the constituted
sisters, regardless of age are incapable of self-support
family home due to travel or studies or work abroad, etc.
because of mental or physical defect, or any of the

beneficiaries mentioned in Article 154 of the Family Code
In other words, the family home is generally characterized by
who is living in the family home and dependent upon the
permanency, that is, the place to which, whenever absent
head of the family for legal support.
for business or pleasure, one still intends to return.

The beneficiaries of a family home are:
The family home must be part of the properties of the absolute
community or of the conjugal partnership, or of the
(1) The husband and wife, or the head of a family; and
(2) Their
parents, ascendants, descendants including legally
exclusive properties of either spouse depending upon the
adopted
classification of the property (family home) and the
relationship be legitimate or illegitimate, who are living in the
property relations prevailing on the properties of the
family home and who depend upon the head of the family for
husband and wife. It may also be constitutedby an
legal support. (Art. 154, Ibid)
children,
brothers
and
sisters,
whether
the
unmarried head of a family on his or her own property.

(Art. 156, Ibid)
b)
Conditions for the allowance of FAMILY HOME as deduction

from the gross estate
For purposes of availing of a family home deduction to the extent
1.
The family home must be the actual residential home
allowable, a person may constitute only one family home.
of the decedent and his family at the time of his
(Art. 161, Ibid)
death, as certified by the Barangay Captain of the

locality where the family home is situated;
Husband and Wife Legally married man and woman.
2.
The total value of the family home must be included

as part of the gross estate of the decedent; and
Unmarried Head of a Family An unmarried or legally separated
3.
Allowable deduction must be in an amount equivalent
man or woman with one or both parents, or with one or
to the current fair market value of the family home as
more brothers or sisters, or with one or more legitimate,
declared or included in the gross estate, or the extent
recognized natural or legally adopted children living with
of
the
decedent's
interest
(whether

conjugal/community or exclusive property), whichever
a.
is lower, but not exceeding P1,000,000.
If the actual amount of medical expenses incurred is

P250,000, then only P250,000 shall be allowed as
deduction and not to the extent of the P500,000
(E) Standard deduction. A deduction in the amount of One Million Pesos
threshold amount;
(P1,000,000) shall be allowed as an additional deduction without need of
b.
If the actual amount of medical expenses incurred
substantiation. The full amount of P1,000,000 shall be allowed as
within the year prior to decedent's death is P600,000,
deduction for the benefit of the decedent. The presentation of such
only the maximum amount of P500,000 shall be
deduction in the computation of the net taxable estate of the decedent is
allowed as deduction. If in case the excess of
properly illustrated in these Regulations.
P100,000 (P600,000-500,000) is still unpaid, such

amount shall not be allowed to be deducted from the
(F) Medical expenses. All medical expenses (cost of medicines, hospital
gross estate as "claims against the estate".
bills, doctors' fees, etc.) incurred (whether paid or unpaid) within one (1)
year before the death of the decedent shall be allowed as a deduction
(G) Amount received by heirs under Republic Act No. 4917 Any amount
provided that the same are duly substantiated with official receipts for
received by the heirs from the decedent's employer as a consequence of
services rendered by the decedent's attending physicians, invoices,
the death of the decedent-employee in accordance with Republic Act No.
statements of account duly certified by the hospital, and such other
4917 is allowed as a deduction provided that the amount of the separation
documents in support thereof and provided, further, that the total amount
benefit is included as part of the gross estate of the decedent.
thereof, whether paid or unpaid, does not exceed Five Hundred Thousand
Pesos (P500,000).
(8) Net share of the surviving spouse in the conjugal partnership or

community property. After deducting the allowable deductions
Any amount of medical expenses incurred within one year from death in
appertaining to the conjugal or community properties included in the gross
excess of Five Hundred Thousand Pesos (P500,000) shall no longer be
estate, the share of the surviving spouse must be removed to ensure that
allowed as a deduction under this subsection. Neither can any unpaid
only the decedent's interest in the estate is taxed.
amount thereof in excess of the P500,000 threshold nor any unpaid

amount for medical expenses incurred prior to the one-year period from
SECTION 7. Computation Of The Net Estate Of A Decedent Who Is A
date of death be allowed to be deducted from the gross estate as claim
Non-Resident Alien Of The Philippines. The value of the net estate of a
against the estate.
decedent who is a non-resident alien in the Philippines shall be determined

by deducting from the value of that part of his gross estate which at the
Illustrations on how to determine the amount of allowable medical
time of his death is situated in the Philippines the following items of
expenses given the P500,000 threshold amount
deductions:

(1) Expenses, losses, indebtedness, and taxes That proportion of the

total expenses, losses, indebtedness, and taxes which the value of such
part bears to the value of his entire gross estate wherever situated. The
allowable deduction under this subsection shall be computed using the
following formula:
"(2) Property previously taxed . . ."
"(3) Transfers for public use . . ."
"(4) Net share of the surviving spouse in the conjugal property or
community property. . . ."
No deduction shall be allowed in the case of a non-resident decedent not a
citizen of the Philippines, unless the executor, administrator, or anyone of
the heirs, as the case may be, includes in the return required to be led
under Section 90 of the Code the value at the time of the decedent's death
of that part of his gross estate not situated in the Philippines.
SECTION 8. Proper Presentation Of Funeral Expenses, Family Home,
Standard Deduction, And Medical Expenses As Deductions From The
Gross Estate. Illustrative examples to properly present the manner of
deducting funeral expenses, family home, standard deduction, and medical
expenses from the gross estate in accordance with the provisions of the
Code.
Although the family home is valued at P2 million, the maximum allowable

deduction for the family home is P1million only.
Note: * Medical expenses are not included in the deductions referred under
Section 86(A)(1) of the Code but are treated as a special item of deduction
under Section 86(A)(6) of the same Code.

Note: Deduction for family home is allowed for P800,000 only which is the
declared value of the family home.

Note: Since the fair market value/zonal value of the conjugal family home
in the above example is P1,500,000, the family home deduction
corresponding to of such fair market value/zonal value is P750,000 only.

(TIN) and file the tax returns of the estate, which RDO likewise,
has jurisdiction over the donor's tax return required to be led by
any party as a result of the distribution of the assets and liabilities
of the decedent.
(C) Place of filing the return and payment of the tax . In case of a
resident decedent, the administrator or executor shall register the
estate of the decedent and secure a new TIN therefor from the
Revenue District Office where the decedent was domiciled at the
time of his death and shall file the estate tax return and pay the
corresponding estate tax with the Accredited Agent Bank (AAB),
Revenue District Officer, Collection Officer or duly authorized
Treasurer of the city or municipality where the decedent was
domiciled at the time of his death, whichever is applicable,
following prevailing collection rules and procedures.
SECTION 9. Time And Place Of Filing Estate Tax Return And Payment Of
In case of a non-resident decedent, whether non-resident citizen
Estate Tax Due.
or non-resident alien, with executor or administrator in the
(A) Time for filing estate tax return. For purposes of determining
Philippines, the estate tax return shall be filed with and the TIN for
the estate tax, the estate tax return shall be filed within six (6)
the estate shall be secured from the Revenue District Office where
months from the decedent's death. The Court approving the
such executor or administrator is registered: Provided, however,
project of partition shall furnish the Commissioner with a certified
that in case the executor or administrator is not registered, the
copy thereof and its order within thirty (30) days after promulgation
estate tax return shall be filed with and the TIN of the estate shall
of such order.
be secured from the Revenue District Office having jurisdiction
(B) Extension of time to file estate tax return. The Commissioner or
over the executor or administrator's legal residence. Nonetheless,
any Revenue Officer authorized by him pursuant to the Code shall
in case the non-resident decedent does not have an executor or
have authority to grant, in meritorious cases, a reasonable
administrator in the Philippines, the estate tax return shall be led
extension, not exceeding thirty (30) days, for filing the return. The
with and the TIN for the estate shall be secured from the Office of
application for the extension of time to file the estate tax return
the Commissioner through RDO No. 39 South Quezon City.
must be filed with the Revenue District Office (RDO) where the
estate is required to secure its Taxpayer Identification Number
The foregoing provisions notwithstanding, the Commissioner of

Internal Revenue may continue to exercise his power to allow a
authorized
representative
may
require
the
executor,
or
different venue/place in the filing of tax returns.
administrator, or beneficiary, as the case may be, to furnish a

bond in such amount, not exceeding double the amount of the tax
(D) Time for payment of the estate tax. As a general rule, the
and with such sureties as the Commissioner deems necessary,
estate tax imposed under the Code shall be paid at the time the
conditioned upon the payment of the said tax in accordance with
return is filed by the executor, administrator or the heirs.
the terms of the extension.
(E) Extension of time to pay estate tax. When the Commissioner

finds that the payment of the estate tax or of any part thereof
Any amount paid after the statutory due date of the tax, but within
would impose undue hardship upon the estate or any of the heirs,
the extension period, shall be subject to interest but not to
he may extend the time for payment of such tax or any part
surcharge.
thereof not to exceed five (5) years in case the estate is settled
through the courts, or two (2) years in case the estate is settled
(F) Payment of the estate tax by installment. In case the available
extra-judicially. In such case, the amount in respect of which the
cash of the estate is not sufficient to pay its total estate tax liability,
extension is granted shall be paid on or before the date of the
the estate may be allowed to pay the tax by installment and a
expiration of the period of the extension, and the running of the
clearance shall be released only with respect to the property the
statute
corresponding/computed tax on which has been paid. There shall,
of
limitations
for
deficiency assessment shall
be
suspended for the period of any such extension.
therefore, be as many clearances (Certificates Authorizing

Registration) as there are as many properties released because
For purposes of these Regulations, the application for extension of
they have been paid for by the installment payments of the estate
time to file the return and extension of time to pay estate tax shall
tax. The computation of the estate tax, however, shall always be
be filed with the Revenue District Officer (RDO) where the estate
on the cumulative amount of the net taxable estate. Any amount
is required to secure its TIN and file the estate tax return. This
paid after the statutory due date of the tax shall be imposed the
application shall be approved by the Commissioner or his duly
corresponding applicable penalty thereto. However, if the payment
authorized representative.
of the tax after the due date is approved by the Commissioner or

his duly authorized representative, the imposable penalty thereon
Where the request for extension is by reason of negligence,
shall only be the interest. Nothing in this paragraph, however,
intentional disregard of rules and regulations, or fraud on the part
prevents the Commissioner from executing enforcement action
of the taxpayer, no extension will be granted by the Commissioner.
against the estate after the due date of the estate tax provided that
all
If an extension is granted, the Commissioner or his duly
the
applicable
followed/observed.
laws
and
required
procedures
are

(G) Liability for payment The estate tax imposed under the Code
shall be paid by the executor or administrator before the delivery
(A) Decedent's Interest. - To the extent of the interest therein of the
of the distributive share in the inheritance to any heir or
decedent at the time of his death;
beneficiary. Where there are two or more executors or

administrators, all of them are severally liable for the payment of
the tax. The estate tax clearance issued by the Commissioner or
the Revenue District Officer (RDO) having jurisdiction over the
estate,
will
serve
as
the
authority
to
distribute
the
remaining/distributable properties/share in the inheritance to the
(B) Transfer in Contemplation of Death. - To the extent of any interest

therein of which the decedent has at any time made a transfer, by trust or
otherwise, in contemplation of or intended to take effect in possession or
enjoyment at or after death, or of which he has at any time made a
transfer, by trust or otherwise, under which he has retained for his life or
heir or beneficiary.
for any period which does not in fact end before his death (1) the
The executor or administrator of an estate has the primary
or (2) the right, either alone or in conjunction with any person, to designate
obligation to pay the estate tax but the heir or beneficiary has
subsidiary liability for the payment of that portion of the estate
which his distributive share bears to the value of the total net
estate. The extent of his liability, however, shall in no case exceed
the value of his share in the inheritance.
possession or enjoyment of, or the right to the income from the property,
the person who shall possess or enjoy the property or the income
therefrom; except in case of a bona fide sale for an adequate and full
consideration in money or money's worth.
(C) Revocable Transfer. (1) To the extent of any interest therein, of which the decedent has at any
time made a transfer (except in case of a bona fide sale for an adequate
Sections 85 & 104, Tax Code

SEC. 85. Gross Estate. - the value of the gross estate of the decedent
shall be determined by including the value at the time of his death of all
property, real or personal, tangible or intangible, wherever situated:
Provided, however, that in the case of a nonresident decedent who at the
time of his death was not a citizen of the Philippines, only that part of the
entire gross estate which is situated in the Philippines shall be included in
his taxable estate.
and full consideration in money or money's worth) by trust or otherwise,

where the enjoyment thereof was subject at the date of his death to any
change through the exercise of a power (in whatever capacity exercisable)
by the decedent alone or by the decedent in conjunction with any other
person (without regard to when or from what source the decedent
acquired such power), to alter, amend, revoke, or terminate, or where any
such power is relinquished in contemplation of the decedent's death.
(2) For the purpose of this Subsection, the power to alter, amend or
revoke shall be considered to exist on the date of the decedent's death

even though the exercise of the power is subject to a precedent giving of
extent of the amount receivable by any beneficiary designated in the policy
notice or even though the alteration, amendment or revocation takes effect
of insurance, except when it is expressly stipulated that the designation of
only on the expiration of a stated period after the exercise of the power,
the beneficiary is irrevocable.
whether or not on or before the date of the decedent's death notice has
been given or the power has been exercised. In such cases, proper
(F) Prior Interests. - Except as otherwise specifically provided therein,
adjustment shall be made representing the interests which would have
Subsections (B), (C) and (E) of this Section shall apply to the transfers,
been excluded from the power if the decedent had lived, and for such
trusts, estates, interests, rights, powers and relinquishment of powers, as
purpose if the notice has not been given or the power has not been
severally enumerated and described therein, whether made, created,
exercised on or before the date of his death, such notice shall be
arising, existing, exercised or relinquished before or after the effectivity of
considered to have been given, or the power exercised, on the date of
this Code.
death.
(G) Transfers for Insufficient Consideration. - If any one of the
(D) Property Passing Under General Power of Appointment. - To the
transfers, trusts, interests, rights or powers enumerated and described in
extent of any property passing under a general power of appointment
Subsections (B), (C) and (D) of this Section is made, created, exercised or
exercised by the decedent: (1) by will, or (2) by deed executed in
relinquished for a consideration in money or money's worth, but is not a
contemplation of, or intended to take effect in possession or enjoyment at,
bona fide sale for an adequate and full consideration in money or money's
or after his death, or (3) by deed under which he has retained for his life or
worth, there shall be included in the gross estate only the excess of the fair
any period not ascertainable without reference to his death or for any
market value, at the time of death, of the property otherwise to be included
period which does not in fact end before his death (a) the possession or
on account of such transaction, over the value of the consideration
enjoyment of, or the right to the income from, the property, or (b) the right,
received therefor by the decedent.
either alone or in conjunction with any person, to designate the persons

who shall possess or enjoy the property or the income therefrom; except in
case of a bona fide sale for an adequate and full consideration in money
(H) Capital of the Surviving Spouse. - The capital of the surviving

spouse of a decedent shall not, for the purpose of this Chapter, be
or money's worth.
deemed a part of his or her gross estate.
(E) Proceeds of Life Insurance. - To the extent of the amount receivable
SEC. 104. Definitions. - For purposes of this Title, the terms 'gross
by the estate of the deceased, his executor, or administrator, as insurance

under policies taken out by the decedent upon his own life, irrespective of
whether or not the insured retained the power of revocation, or to the
estate' and 'gifts' include real and personal property, whether tangible or
intangible, or mixed, wherever situated: Provided, however, That where the
decedent or donor was a nonresident alien at the time of his death or

donation, as the case may be, his real and personal property so
(a) the amount by which tax imposed by this Chapter exceeds the amount
transferred but which are situated outside the Philippines shall not be
shown as the tax by the donor upon his return; but the amount so shown
included as part of his 'gross estate' or 'gross gift': Provided, further,
on the return shall first be increased by the amount previously assessed
That franchise which must be exercised in the Philippines; shares,
(or Collected without assessment) as a deficiency, and decreased by the
obligations or bonds issued by any corporation or sociedad anonima
amounts previously abated, refunded or otherwise repaid in respect of
organized or constituted in the Philippines in accordance with its laws;
such tax, or
shares, obligations or bonds by any foreign corporation eighty-five percent

(85%) of the business of which is located in the Philippines; shares,
(b) if no amount is shown as the tax by the donor, then the amount by
obligations or bonds issued by any foreign corporation if such shares,
which the tax exceeds the amounts previously assessed, (or collected
obligations or bonds have acquired a business situs in the Philippines;
without assessment) as a deficiency, but such amounts previously
shares or rights in any partnership, business or industry established in the
assessed, or collected without assessment, shall first be decreased by the
Philippines, shall be considered as situated in the Philippines: Provided,
amount previously abated, refunded or otherwise repaid in respect of such
still further, that no tax shall be collected under this Title in respect of
tax.
intangible personal property:

(a) if the decedent at the time of his death or the donor at the time of the
donation was a citizen and resident of a foreign country which at the time
of his death or donation did not impose a transfer tax of any character, in
respect of intangible personal property of citizens of the Philippines not
residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent or donor was a
citizen and resident at the time of his death or donation allows a similar
exemption from transfer or death taxes of every character or description in
respect of intangible personal property owned by citizens of the
Philippines not residing in that foreign country.
The term 'deficiency' means:

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MONTERO // 3A TAX DIGESTS

to the rates provided in the Code.

Subject: Consolidated Revenue Regulations on Estate Tax and Donor's

"If the Net Estate is:

Tax Incorporating the Amendments Introduced by Republic Act No. 8424,

But not over

SECTION 3. The Law That Governs The Imposition Of Estate Tax . It is

MONTERO // 3A TAX DIGESTS

or intangible, wherever situated.

To determine the value of the right to usufruct, use or habitation, as well as

provided, that, with respect to intangible personal property, its

inclusion in the gross estate is subject to the rule of reciprocity

beneficiary in accordance with the latest basic standard mortality table, to

provided for under Section 104 of the Code.

be approved by the Secretary of Finance, upon recommendation of the

SECTION 5. Valuation Of The Gross Estate. The properties comprising

SECTION 6. Computation Of The Net Estate Of A Decedent Who Is Either

A Citizen Or Resident Of The Philippines. The value of the net estate of

market value as determined by the Commissioner or the fair market value

as shown in the schedule of values fixed by the provincial and city

(A) Expenses, losses, indebtedness, and taxes Such amounts for:

values, the Commissioner is authorized to divide the Philippines into

(1) Actual funeral expenses (whether paid or unpaid) up to the time of

different zones or areas and shall, upon consultation with competent

interment, or an amount equal to five percent (5%) of the gross estate,

whichever is lower, but in no case to exceed P200,000.

market value of real properties located in each zone or area.

allowed as a deduction under this Subsection. Neither shall the unpaid

portion of the funeral expenses incurred which is in excess of the

P200,000 threshold be allowed to be claimed as a deduction under "claims

common shares, appraisal surplus shall not be considered as well as the

against the estate" provided under Subsection (C) hereof.

value assigned to preferred shares, if there are any.

meaning. They include:

(a) The mourning apparel of the surviving spouse and unmarried

minor children of the deceased bought and used on the occasion

MONTERO // 3A TAX DIGESTS

percent (5%) of the gross estate is P70,000, only P70,000 will be

(c) Publication charges for death notices;

(d) Telecommunication expenses incurred in informing relatives of the

their upkeep. In case the deceased owns a family estate or

amount incurred is P150,000 where P20,000 thereof is still

unpaid, the only amount that can be claimed as deduction for

(f) Interment and/or cremation fees and charges; and

funeral expenses is P100,000. The entire P50,000 excess amount

consisting of P30,000 paid amount and P20,000 unpaid amount

ceremonies incident to interment.

can no longer be claimed as FUNERAL EXPENSES. Neither can

Expenses incurred after the interment, such as for prayers, masses,

the P20,000 unpaid portion be deducted from the gross estate as

CLAIMS AGAINST THE ESTATE under Subsection (C) hereof

burial expenses borne or defrayed by relatives and friends of the deceased

(2) Judicial expenses of the testamentary or intestate proceedings.

the inventory-taking of assets comprising the gross estate, their

expenses but should be claimed under subsection (F) of this section.

administration, the payment of debts of the estate, as well as the

connection with the interment or burial of the deceased. The expenses

must be duly supported by receipts or invoices or other evidence to show

estate tax return. Judicial expenses may include:

that they were actually incurred.

(b) Attorney's fees;

(c) Court fees;

(d) Accountant's fees;

actually incurred is P50,000, only P50,000 will be allowed as